Nine months after Congress passed the sweeping One Big Beautiful Bill Act and its multibillion-dollar cuts to health care and nutrition-assistance programs, researchers and policy analysts are still trying to clarify the toll the legislation could take on state budgets. And as the picture starts to come into focus, they say, it is not a pretty one—especially for public colleges and universities.
Some level of funding cuts for higher ed are inevitable as states figure out how to fill the gap in social services left by the federal cuts. Historically, funding for public colleges and universities has served as an indicator of overall budgetary health: When state budgets and tax revenue are strong, typically so is funding for higher ed. But when states face tight budgets, colleges are first on the chopping block.
Now—with a little less than a year to go before OBBBA’s nearly trillion-dollar 10-year cuts to Medicaid and the Supplemental Nutrition Assistance Program are slated to take effect—policy experts are trying to determine which states are most at risk, and to what degree.
A new report released Monday by the Center for American Progress looks at historical data to illustrate the overall trend of higher ed budget cuts when state finances are tight and the negative effects that decreased appropriations can have. Findings showed that state-level funding cuts for higher ed during the 2008 recession amounted to more than 23 percent; meanwhile tuition rates increased by about 18 percent. The report also maps out current state-by-state budgets to serve as a baseline.
A different briefing, released by the National Conference of State Legislatures in October, explains how much the administrative costs for SNAP and Medicaid could be passed on to states.
But neither report, nor any Inside Higher Ed has seen so far, directly quantifies how much any state’s budget for higher education will be affected by the One Big Beautiful Bill Act. State higher education associations, think tank leaders and college access advocates say that’s largely because of how many variables are at play when considering the future of state funds.
“At this point, it’s difficult to know the exact budgetary implications for states, what their overall tax revenues will be and how state legislatures will respond across their various sessions and appropriations cycles,” said Ben Cecil, deputy director of higher education policy at Third Way, a left-of-center think tank. “There’s a long line of dominoes that must fall before colleges and universities understand the full scope of any potential state-level cuts and what that could mean for their bottom lines in upcoming fiscal years.”
Even then, Cecil said, based solely on the size of the federal funding cuts that states will be grappling with, “I imagine most colleges and universities are preparing for several rocky years ahead as states work to figure out how to allocate limited resources in an increasingly tight budgetary environment.”
‘Bedrock of Funding’
In the meantime, CAP’s report lays out which institutions might be most at risk and recommends steps that all states could consider to prevent them from making major cuts to higher ed.
First, it shows how critical state funding for higher education has become. In the case of both two- and four-year public colleges, state and local appropriations make up the biggest chunk of revenue. For four-year institutions, that number is about one-fifth (21 percent) and for community colleges it’s about half (47 percent).
“State and local appropriations are the bedrock of public higher education funding,” said Sara Partridge, CAP’s associate director of higher education. “So any decreases in state budgets will be felt.”
“Public colleges and universities are engines of economic mobility, particularly for students from low- and moderate-income households, and continuing to fund these institutions is important to both their individual futures and the state’s economic future,” she added.
The report also breaks down those numbers state by state, calculating funding per full-time student and what that means proportionally when compared to overall state revenue. CAP refers to that ratio value as the level of “state effort” when it comes to higher education funding. It then compares both values for each state to the national average.
Only 14 states landed above the national average for both per-student funding and ratio of funding to total tax revenue, the findings show. Twenty-one fall below in both categories—most of which are located in the Midwest and Northeast.
Robert Kelchen, head of the Department of Educational Leadership and Policy Studies at the University of Tennessee at Knoxville, anticipates that the institutions in those states will be most vulnerable to budget cuts. And he noted that not all of them are politically red.
“For example, a state like Washington is called out for being a fairly low-effort state in higher education,” he said. “So state funding does not map neatly onto a red-versus-blue continuum.”
In fact, Kelchen added, a number of the Southern states, like Mississippi and Alabama, perform strongly when it comes to the proportion of state funding put toward higher education. But they fall below the national average for overall funding per student.
“They’re also states that are less likely to reach for tax increases when budgets go south,” he said.
But for the states that do consider tax increases, or other pre-emptive budgetary measures, CAP offered five strategies to stabilize higher education funding: establish progressive tax models, dedicate higher education trust funds, set legal benchmarks for college and university funding adequacy, set aside a rainy day fund for higher ed, and allow grassroots ballot initiatives to bolster college funding.
The report also shares four examples of how those strategies, including a Massachusetts tax increase, are playing out in real time and helping fund education-access projects like free community college.
“All states are different in their economies and their politics, in their budgetary processes, so in all likelihood, we will see a range of responses,” Partridge said. “We are already beginning to see the impacts of some of these policies tangibly and how they impact access and affordability for students.”
Kelchen warned that for states that haven’t begun putting such policies in place, it may be too late.
“We are looking at rain clouds on the horizon right now, and so states are just unlikely to have the capacity to contribute in a meaningful way to rainy-day funds,” he said.
